PFE Financial Analysis

Analysis Date: 2/5/2025

Business Model

Pfizer operates a global biopharmaceutical business, generating revenue primarily from the sale of prescription medicines and vaccines. Revenue is categorized under Global Biopharmaceuticals Business (Biopharma), Pfizer CentreOne (PC1) which is contract manufacturing and API sales, and Pfizer Ignite. Biopharma is further divided into Primary Care, Specialty Care, and Oncology.

Revenue Sources

• Primary Care: Includes Eliquis, Prevnar family, Paxlovid, Comirnaty, Nurtec ODT/Vydura, Abrysvo, Premarin family, BMP2, FSME-IMMUN/TicoVac and other primary care products.
• Specialty Care: Includes Vyndaqel family, Xeljanz, Enbrel (outside US & Canada), Sulperazon, Zavicefta, Octagam, Inflectra, Genotropin, Zithromax, BeneFIX, Oxbryta, Cibinqo and other specialty care products.
• Oncology: Includes Ibrance, Xtandi, Padcev, Oncology biosimilars, Adcetris, Inlyta, Lorbrena, Bosulif, Braftovi/Mektovi, Tukysa, Elrexfio, Tivdak, Talzenna and other oncology products.
• Pfizer CentreOne (PC1): Contract manufacturing and active pharmaceutical ingredient sales.
• Pfizer Ignite: Not further detailed in provided documents.

Income Statement Analysis

• Revenue increased by 22% compared to Q4 2023, primarily due to a one-time, non-cash Paxlovid revenue reversal of $3.5 billion recorded in Q4 2023 and growth from legacy Seagen portfolio, Vyndaqel family, and higher Paxlovid sales year-over-year (excluding the revenue reversal).
• Cost of Sales decreased by 22% due to favorable changes in sales mix, primarily from lower Comirnaty sales and the impact of the Paxlovid revenue reversal in Q4 2023.
• Selling, informational and administrative expenses decreased by 7% operationally, driven by reduced marketing and promotional spending.
• Research and development expenses increased by 8% operationally, mainly due to spending on Seagen acquired product candidates.
• Net income attributable to Pfizer Inc. common shareholders significantly improved from a loss of $3,369 million in Q4 2023 to a profit of $410 million in Q4 2024, largely due to the Paxlovid revenue reversal in the prior year and overall revenue growth.

Capital Allocation

In 2024, Pfizer reinvested $10.8 billion in internal R&D and approximately $300 million in business development. They returned $9.5 billion to shareholders through dividends. No share repurchases were made in 2024, but the company has a remaining share repurchase authorization of $3.3 billion. Pfizer aims to de-lever its balance sheet by the end of 2025 and then return to a more balanced capital allocation strategy, including potential share repurchases and value-creating business development. Management mentioned capacity for $10-15 billion in BD in 2025 if desired (Earnings Call Transcript).

Management Commentary

2024 was a strong year of execution and performance for Pfizer in which we met or exceeded our strategic and financial commitments, strengthened our company and, most importantly, reached millions of patients with our medicines and vaccines.

Full year 2024 adjusted gross margins expanded to 74% as we continue to drive cost improvements across our manufacturing network.

We successfully delivered on our $4 billion net cost savings target from our ongoing cost realignment program, and, as captured in our 2025 financial guidance, we have increased our overall savings target to approximately $4.5 billion by the end of this year.

Abrysvo globally, down 62% operationally, driven primarily by a significant reduction in vaccination rates in the U.S. for the older adult indication.

Xeljanz globally, down 29% operationally, driven primarily by lower demand globally resulting from ongoing shifts in prescribing patterns related to label changes.

Oncology biosimilars globally, down 35% operationally, driven primarily by supply constraints in certain products, as well as both lower demand and lower net price in the U.S.

Overall Sentiment: Positive. Management expresses confidence in the company's performance, strategic direction, and future growth, highlighting strong financial results for 2024 and reaffirming 2025 guidance. They are optimistic about R&D productivity improvements and commercial execution, while acknowledging challenges in certain product areas.

Recommendation

Rating: Hold

Reason for Rating: Based on the provided information, a Hold recommendation is appropriate. Pfizer shows strong revenue growth in Q4 2024, heavily influenced by one-time factors and Seagen acquisition. While management is optimistic about future growth and margin expansion, the underlying performance excluding these factors needs further observation. The lack of Balance Sheet and Cash Flow Statement data limits a complete assessment. The positive outlook is tempered by declines in some key products like Abrysvo and Xeljanz. A Hold is recommended to observe consistent performance and progress on pipeline and cost efficiencies.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/5/2025, 3:44:35 AM